The National Pension Commission (PenCom) has attributed the N58 billion decline in total pension assets from an all-time high value of N12.306 trillion as of December 2020, to the latest figure of N12.248 trillion in February 2021, to market volatility.
PenCom, in its monthly report of pension asset value, posted in its website, which THISDAY accessed yesterday, said the amount recorded in February 2021 was contributed by 9,265,141 registered members under the Contributory Pension Scheme (CPS).
But enquires by THISDAY from PenCom showed that contrary to insinuations that the decline has to do with the general economic downturn, which has compelled organisations to downsize, thereby making contributors into the scheme to demand withdrawals within the limit allowed by the law in time of job loss, the reverse was the case.
PenCom’s Head of Corporate Communications, Mr. Peter Aghahowa, in a telephone interview, attributed the decline to a valuation issue.
This, he said, was due to volatility in the price of fixed-income securities.
According to him, there has been depreciation in the prices of various investment securities, as a result, yields from investments became low leading to a decline in the value of pension assets in February.
He, however, said there was nothing to worry about, as experience had shown that asset prices fluctuate and as such the decline might not continue to reflect in the remaining months of the year.
He added that all funds were not affected as the decline depends on the investment portfolio each fund was invested.
According to him, the fund structures mostly affected were funds from closed Pension Fund Administrators, RSA Fund11 and RSA Fund IV.
Aghahowa said there were no special reasons these funds were affected other than their choice of investment portfolios and the prevailing price behaviours in the market as at the time of their investment.
PenCom, in an explanatory note on the development, stated: “The decline of N51.30 billion in February was mainly attributed to the depreciation in the prices of fixed-income securities in the trading portfolios of the approved existing scheme. RSA Fund 11, IV and Closed Pension Fund Administrators thereby creating unrealisable losses on marked-to-market fixed income securities.”
It said the value of the bonds in the trading portfolios fluctuated based on the supply and demand of underlying securities as well as the outlook of the financial market. About 73 per cent of the entire pension assets are invested in government securities deemed to be the safest investment portfolio.
-This Day